Jevons Paradox

CORE DEFINITION

The Jevons paradox (English: Jevons paradox), also known as the Jevons effect, is an economic theory. It states that when technological progress increases the efficiency of resource use (i.e., reduces the amount of resource required per unit of output), the total consumption of that resource may not decrease but may actually increase. This is because efficiency gains lower the effective cost of using the resource, and if demand is sufficiently price-elastic, it stimulates demand, offsetting or even exceeding the savings per unit. This paradox is particularly common in environmental economics, as many governments and environmentalists typically assume that efficiency improvements will reduce resource consumption, overlooking the possibility of the paradox. In 1865, British economist William Stanley Jevons observed that technological improvements that increased the efficiency of coal use actually led to an increase in total coal consumption across industries. He argued that, contrary to common intuition, one cannot rely on technological progress to reduce fuel consumption. Modern economists have re-examined this issue from the perspective of the 'rebound effect'. Efficiency improvements not only reduce the amount of resource needed per unit of use but also lower the relative cost of using that resource, thereby increasing demand. This offsets, to some extent, the savings achieved through efficiency gains.